Saturday 03 Jun 2023
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NEW YORK/LONDON (May 27): Wall Street's main indices rose and European shares logged their largest one-day gain in two months on Friday (May 26), as talks on raising the US debt ceiling progressed.

Treasury yields climbed as investors rethought how long interest rates are likely to keep rising.

Democratic and Republican negotiators were still struggling to reach a deal to raise the US government's debt ceiling with the deadline looming.

The MSCI world equity index, which tracks shares in 49 nations, gained 1.09%, but was still down 0.51% on the week.

US data showed stronger-than-expected consumer spending in April. The increase in personal consumption expenditures raised expectations the US Federal Reserve will hike interest rates again in either June or July.

US President Joe Biden and top congressional Republican Kevin McCarthy appeared to be closing in on an agreement ahead of a June 1 deadline that would raise the government's US$31.4 trillion (RM144.47 trillion) debt ceiling for two years. A top Republican, however, said there were disagreements over some benefit programmes for low-income Americans. Meanwhile, after the market close, Treasury Secretary Janet Yellen extended the deadline for raising the debt limit to June 5.

The dollar eased against a basket of currencies, but was still on track for a third straight weekly gain, as markets bet on higher-for-longer interest rates.

Gold advanced from two-month lows, and oil prices rose.

Eurozone government bond yields were higher, as robust economic data and hawkish remarks by central bank officials triggered some upward repricing in market bets on eurozone interest rates.

"This week has been a bit of a wake-up call to rate expectations. There is a realisation that inflation is going to be stickier for a lot longer," said Mike Hewson, the chief markets strategist at CMC Markets.

The Dow Jones Industrial Average rose 1.00% to 33,093.34, the S&P 500 gained 1.30% to 4,205.45, and the Nasdaq Composite climbed 2.19% to 12,975.69.

Chip stocks surged for a second day on optimism about artificial intelligence. Marvell Technology Inc finished up more than 30%, after it forecast its annual artificial-intelligence revenue would double.

Shares in Nvidia Corp, the world's most valuable chipmaker, added 2.54% after vaulting to a record high on Thursday, following a bumper forecast.

The pan-European STOXX 600 index closed 1.2% higher, bouncing back from Thursday's eight-week low. Swedish gaming company Embracer jumped 13.1% to top the index, and Faurecia added 7.5%, after Jefferies upgraded the French car parts maker to "buy".

Italy hopes to close 2023 with economic growth of between 1.2% and 1.4%, higher than the official target set at 1% in April, Economy Minister Giancarlo Giorgetti said.

The yield on two-year Treasury notes, which rises with traders' expectations of higher federal fund rates, rose to 4.5598% from 4.51% previously.

China recovery questioned

In Asia, Japan's Nikkei rose 0.4%, with revenue and production upgrades for Nvidia boosting Japanese firms with exposure.

The cost of insuring exposure to US government debt dropped on Friday.

China's yuan slid along with Chinese stocks, as the shine comes off expectations of a booming post-pandemic recovery, sending steel prices in the country to a three-year low.

"The US debt issues are not the only 'ceiling' that we are dealing with, as a slowdown in Chinese economic data suggests that a ceiling for growth may be forming as well," said RBC technical strategist George Davis.

Brent crude settled 69 cents, or 0.9%, higher at US$76.95 a barrel, and US crude closed up 84 cents, or 1.2%, at US$72.67, as traders juggled conflicting messages on supply from key producers, ahead of the next policy meeting of the Organization of the Petroleum Exporting Countries and its allies (Opec+).

Spot gold prices rose 0.33% to US$1,946.69 an ounce, and gold futures edged up 0.03% to settle at US$1,944.30.

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